Gas-powered turbines will bring some complications. Building a generator requires about a 20-year commitment, which could cause some developers to balk. (Source: Shutterstock)
Gas and midstream companies have spent much of the last year talking about data center growth and the corresponding search for power.
What may have not caught the public’s notice, however, is the intensity of the search, said David Wilson, CEO of Energy Exemplar.
As artificial intelligence (AI) developed, tech companies spent the last year in a gold rush for the electrons that will power the massive server warehouses they need. They’ve considered just about every segment of the power generation sector.
The lesson for midstream companies and gas producers: be ready to work fast.
“Data centers are white-hot today, and [tech companies] are willing to pay a premium to be able to build,” Wilson said. “And that will be a premium for a site, it will be a premium for energy, particularly clean energy, and you've seen that happen recently.”
Energy Exemplar provides software platforms that simulate energy markets. The company is witnessing a market where, for some, timing is everything and price is not always the primary consideration.
Wilson pointed to several major tech players’ plans to jumpstart out-of-commission nuclear reactors. In September 2024, Microsoft and Constellation Energy Group announced plans to re-open Three Mile Island Unit 1 in Pennsylvania. Holtec International borrowed $1.5 billion from the Department of Energy to re-start Palisades Nuclear plant in Michigan, which had been closed in 2022.
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The nuclear plants and some other, older generator facilities no longer make commercial sense. The electricity produced at a restarted Three Mile Island will cost more than five times what power typically costs in the area now, according to estimates.
“They’re not profitable in a normal market, but the data center companies have come in and said, ‘We're willing to pay a premium to secure that energy, with the extra bonus that it's low carbon, and they're turning those assets back on,” Wilson said.
Turning up the gas
Tech companies originally planned to go carbon-free for data center power but turned to natural gas over the past year and a half. The reality is that the U.S. has a limited number of old power plants that can be re-started, and developing new nuclear power will take at least a decade.
Solar and wind power don’t provide the stability needed for data center, and renewables can’t meet the centers’ massive power requirements. Gas, on the other hand, is readily available throughout the U.S. and can scale up to whatever power level is needed.
Gas-powered turbines will bring some complications. Building a generator requires about a 20-year commitment, which could cause some developers to balk.
“Part of the complexity for anyone who is building an energy asset is this is a multi-decade capital investment, right?” he said. “It's like you don't go out and buy a new car for a couple of weeks of driving.”
However, the current complication for tech companies is the need to build as quickly as possible to keep up with the competition.
Energy Transfer (ET) announced a deal with CloudBurst Data Centers to supply an AI data center campus near San Marcos on Feb. 10. ET CEO Mackie McCrea said the company learned a primary lesson during the transaction: Tech companies “are in a hurry.”
In 2024, the number of data center capacity in the U.S. doubled from the year before, according to CBRE Investment. The number and size of the facilities continues to grow.
Wilson pointed to the recent announcement in Salt Lake City, Utah, of a $2 billion loan for a new data center. The local electric utility has agreed to provide 175 megawatts of power, enough for a U.S. city with 175,000 average homes.
Before 2025, no data center had received a multibillion-dollar loan for development. By the second month of the new year, there had been two. Wilson said virtually any built data center project is likely to be utilized, considering the potential of the application.
“It does seem to be one of the most disruptive technologies that we've ever seen,” he said. “It's like the steam engine, the internet. I've been using some of the tools and they're actually pretty impressive.
“It does feel like they're here to stay, and they're going to get into the very fabric of our lives.”
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